Copper Set for Best Month in a Decade as Speculators Pile in

  • Prices are rising as global demand shows signs of recovery
  • Deutsche Bank says metals surge has overshot fundamentals

Copper, seen as a barometer for the global economy, is on a tear. The metal is headed for the biggest monthly gain in a decade as investors flock back to commodities even as some banks warn the rally has gone too far.

Sometimes referred to as having an economics Ph.D for its ability to track the economy’s health, copper has surged 21 percent in November, and neared a 17-month high after better-than-estimated U.S. data on durable goods and manufacturing Wednesday. The rally prompted Deutsche Bank AG and Goldman Sachs Group Inc. to warn that prices have overshot fundamentals.

“The rally probably still has legs, but it isn’t due to extremes in fundamental conditions, but rather shifts in investor participation,” Nicholas Snowdon, a metals analyst at Standard Chartered Plc, said on Thursday. The move has been primarily driven by a change in sentiment among investors in China, he said.

Copper for three-month delivery climbed as much as 3.8 percent to $5,957.50 a metric ton before settling at $5,868 on the London Metal Exchange. Most other industrial metals also gained, with zinc reaching en eight-year high and lead the highest in two years. U.S. markets are closed for the Thanksgiving holiday.

Read more: Chinese speculators are driving up commodity prices

At a time when money managers have never been so bullish on copper, there are other signs that prices have jumped too fast. The metal’s 14-day relative-strength index is at 80.4, above the level of 70 that suggests to some traders and analysts that prices are overbought.

“Normally, if you saw prices going up 5 to 8 percent over a week, you’d think the rationale would be for the market to consolidate, but we’re still seeing more upward momentum,” Xiao Fu, head of commodities research at BOCI Global Commodities U.K. Ltd., said by phone in London. There are also signs that Chinese producers have been slow to step up output amid higher prices, which may help support the rally, she said.

Mining stocks have also risen this month, with the FTSE 350 Mining Index up 8.1 percent. The gauge added 0.5 percent on Thursday, rising a fourth day. First Quantum Minerals Ltd. and Turquoise Hill Resources Ltd. were among the top performers on the S&P/TSX Composite Index on Thursday, gaining as much as 5.5 percent and 5.2 percent, respectively.

In other metals news:

  • Zinc climbed 2 percent, taking this year’s gains to 69 percent.
  • Copper futures in Shanghai soared by the daily limit and closed at the highest since 2014, while zinc also advanced by its limit.
  • Aluminum borrowing fees have risen in London as traders find it harder to get hold of metal.
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